On Thursday, July 3, 2025, Congress passed H.R. 1, a significant tax package with implications for both taxpayers and nonprofit organizations. The bill was signed into law by the president on the 4th of July. Here are some of the major provisions that will directly impact nonprofits and their ability to serve communities nationwide.
Universal Charitable Deduction
One positive provision of the bill is the creation of a new universal charitable deduction to encourage charitable giving among the approximately 90% of individual taxpayers who do not itemize their deduction. This new rule allows taxpayers who do not itemize deductions to claim a charitable deduction of up to $1,000 for individuals and $2,000 for married couples on their tax returns. This provision is based on the bipartisan “Charitable Act” and is projected to generate approximately $74 billion in charitable contributions over the next decade.
Modifications to Charitable Giving Incentives
While the universal charitable deduction is intended to encourage broader participation in charitable giving, the bill includes other provisions that may negatively affect nonprofit organizations’ ability to raise funds.
The new cap on itemized deductions for high-income taxpayers in the 37% tax bracket, and the minimum deduction floors could reduce the value of the charitable deduction for those high net-worth individuals and corporations. The law introduces a 0.5% floor for itemized charitable deductions for high-income taxpayers and a 1% floor for corporate charitable contributions, meaning contributions must exceed these thresholds to be deductible.
These changes are likely to impact the amount of charitable giving by individuals and corporations. It is estimated that these provisions will reduce resources for nonprofit organizations and their communities by at least $81 billion over the next 10 years, shrinking an already reduced funding pool that nonprofit organizations are competing for.
Changes to Safety Net Programs
The bill includes revisions to Medicaid and the Supplemental Nutrition Assistance Program (SNAP). While specific eligibility changes are not detailed in the summary, the legislation is expected to reduce federal support for these programs, which may alter the availability of healthcare and food assistance for some individuals. This is expected to result in a dramatic increase in demand for services provided by nonprofit organizations in the low-income healthcare and nutritional support spaces, while simultaneously reducing those organizations’ access to federal resources.
Removed Provisions
Earlier versions of the bill included proposals that would have affected nonprofit governance and taxation, such as expanded executive authority over tax-exempt status and taxes on certain nonprofit employee benefits. However, these provisions did not make it into the final bill.
Impact
The full impact of these new laws will only become clear once they are implemented, but we encourage all of our clients to review their funding sources, cash flows and impacted communities to consider how the new laws may affect their operations.
Do you have questions about the BBB or want to stay up to date on key developments for your organization? Join us for our first-ever Evergreen Alliance Nonprofit Conference on September 30, 2025. [Register here—it’s free!]